Freelancers, by nature, live in a world of unpredictability. With no steady paycheck or guaranteed income, their financial life is often a balancing act - moving between periods of inflow and dry spells. With income that fluctuates from month to month, it can be difficult to maintain consistent investment strategies like systematic investment plans (SIPs).
Yet, for freelancers like Kritika Narula, a 28-year-old freelance content and marketing consultant, the key to mastering personal finances lies in creating a structure where there seems to be none.
Kritika, who manages her business as meticulously as any full-time entrepreneur, is no stranger to managing the challenges of irregular cash flow. “Freelancing income can be highly erratic,” she admits. “So I aim to constantly bring some predictability in the process. I work with clients on retainers — many fellow freelancers call them ‘anchor clients’ that are more stable and regular contracts, and hence assured income inflow.”
Treating Freelancing As Business
“First and foremost, freelancers should understand what exactly is their income barring the expenses they incur to do their work. For example, a photographer working on a gig model will need to buy or maintain a good camera including other devices required in the profession,” says Manasvi Garg, Sebi RIA, CFA, Founder and Chief Wealth Manager, Moneyvesta.
One of Kritika’s core strategies is treating her freelancing career like a business. From maintaining a detailed spreadsheet of income and expenses to setting up financial guardrails, she ensures her monthly income does not dip too low, enabling her to set aside a fixed percentage for savings and investments each month.
"I look at my average monthly income rather than actual monthly earnings to smooth out the highs and lows," she explains. For Kritika, this discipline translates into regular investments. "I currently invest Rs 20,000 per month in SIPs. If my annual income, calculated during tax season, exceeds expectations, I make additional one-time investments," she shares. This methodical approach to investing ensures that even with a fluctuating income, she remains committed to her financial growth.
Her story mirrors what Garg emphasises for freelancers. “They can opt for flexible options like quarterly or lump-sum contributions. The goal is not about sticking to rigid monthly payments but ensuring that they stay invested," he states.
Frequency Matters, Not. Build A Portfolio
The concept of monthly SIPs can be daunting for many freelancers. After all, what happens when a project falls through or a payment is delayed? Garg reassures freelancers that they aren’t bound by a fixed SIP structure, rather building a portfolio is more important.
“Freelancers can make lump-sum investments during periods of high income or opt for quarterly contributions if monthly payments feel too restrictive,” he says. The key, as Garg points out, is consistency - not frequency.
With a surplus amount, a lump-sum investment in SIPs can be your go-to move as a freelancer.
Kritika's approach of keeping a minimum monthly income in mind allows her to maintain regular SIP contributions without worrying each month. "It's an automated payment that can happen without me doing mental gymnastics," she says.
Building An Emergency Fund
Kritika’s discipline extends beyond investments as she also maintains an emergency fund. "My liquidated savings can cover six months of expenses," she explains. This financial cushion ensures that she can manage her lifestyle even during lean months, without having to break into her SIPs or other long-term investments.
Garg reiterates the importance of having such a buffer. "Freelancers should aim for an emergency fund covering at least 6 to 12 months of living expenses," he advises. The fluctuating nature of freelance income makes it critical to have this financial safety net in place before and while committing to long-term investments like SIPs.
Avoid High-risk Investments
Asks Ankit Mishra, a freelancer, “Sometimes I want to move my funds from SIP to equity. Would that be a good approach?”
“I would not directly recommend moving from SIPs to equity if you are not passionate about markets. It can become too overwhelming,” Garg says.
Freelancers can be particularly vulnerable to the lure of high-risk, high-reward investments during lean months with surplus money in hand. Garg strongly cautions against this, advising freelancers to stay away from high-risk investment such as futures and options (F&O) trading. "These are extremely risky, and freelancers cannot afford the significant losses that may result," he explains. Even major financial institutions struggle to manage these risks, making them especially dangerous for retail investors with irregular income streams.
Rather he suggests investing in mutual funds. However, freelancers, because of their volatile incomes, should be wary about their asset allocations. “They should aim for a balanced portfolio that cushions against market volatility. A mix of equity, debt, and commodities can be good,” he states.
Is Diversification The Key: How Many SIPs Are Too Many?
In the case of a bulk income, Garg suggests keeping your funds in liquid or debt funds for the safety of capital so that you are not investing in the market at the wrong time. Break it up into 6 parts, and then systematically (gradually) transfer your money into funds that you want to invest in the long term.
From a diversification point of view, you should not invest in more than 5-6 mutual funds (or SIPs). “Typically, retail investors may not be able to keep up with the market cycle to understand when sectoral and thematic funds generate the most returns.
“Having a good mixture of flexi-cap, hybrid, and some conservative funds would be good for your portfolio,” Garg suggests, however, he emphasises that a financial advisor would do investors much good than ignorantly taking risk with investments.
Final Word
Freelancers like Kritika Narula are proof that irregular income doesn’t have to be a barrier to successful financial planning. By treating freelancing like a business, maintaining an emergency fund, and committing to a flexible SIP strategy, freelancers can steadily build wealth while navigating the ebbs and flows of their income streams.
As Manasvi Garg puts it, “Freelancers should embrace flexibility but also invest consistently.” With the right mix of discipline, diversification, and professional guidance, freelancers can aptly create a SIP investment strategy that works well for their individual needs.
